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Thursday, March 30, 2006

Bessemer invests in India' infrastructure sector

We've just invested Rs. 100 crore ($ 23 million) in Shriram EPC Limited, a specialized engineering & construction services company in India! This is our fourth India investment, after Rico Auto, Sarovar Hotels and BA Systems. That's as good an excuse as I have for not blogging, as I've been really busy over the last 6 weeks on this front.

Shriram EPC is a part of the Shriram Group, a reputed Chennai-based conglomerate known for its financial services businesses (chit funds, truck financing, consumer lending). Shriram EPC builds small-midsize power plants with a focus on renewable energy (i.e. biomass-based plants & windmills), does industrial construction (builds parts of steel & other metal plants, constructs cooling towers) and works with municipalities on water/sewage projects. Besides the niche focus on specific areas within the infrastructure sector, Shriram EPC also has strong technology tie-ups in most of its business lines (e.g. with Hamon, world's #2 cooling tower company). We really liked Shriram EPC's management team, most of whom have over 2 decades experience in the sector. On a personal note, Shriram EPC's CEO - T Shivaraman - and I are both alumni of both Don Bosco School in Madras and of IIT Madras. (Since hardly 1-2 people make it to IITM from Don Bosco, I suspect the two of us are part of a rather small group of people with affiliations to both these institutions).

We've been tracking India's infrastructure 'catch-up' over the last year. We (and several analysts) believe that India is now on a belated but sustained push to invest in infrastructure across-the-board (power, roads, water, ports/airports, urban development). Based on how such infrastructure build-outs have happened in other parts of the world (think of USA's freeway network built in the last century & China's efforts over the last 20 years), this process spans several decades. These are still early days in India, and we expect these investments to sustain over the many years to come. I (and you) know that there will be some stops-and-starts along the way, but process is irreversible.

Shriram EPC fits well into our thesis of being a part of this infrastructure build-out. Having grown up in Chennai, I am familiar with the Shriram Group and hold them in high regard. I am personally glad that Bessemer now has an opportunity to work with the group. On a lighter note, I now have an official reason for regular visits to my family in Chennai!

While the real work begins now, I hope I'll get back to blogging more often now that the investment is completed!

Press coverage of this investment - 1, 2, 3, 4. Here's the official press-release:

Bessemer Venture Partners invests Rs.100 crores in Shriram EPC Ltd.

To fuel its fast growth, Shriram EPC Ltd. (SEPC) has raised Rs.100 crores ($ 23 million) equity capital from Bessemer Venture Partners, a leading Global Venture Capital and Private Equity Firm. Shriram EPC Ltd., a member of the Chennai-based Shriram Group, is an emerging leader in Engineering Services Segment. The Company provides turnkey solutions in Power Projects, Metallurgical Projects, Cooling Towers, Water Treatment Plants and Windmills. The investment will fund SEPC’s growth plans. These include expanding existing capacity of windmills, acquiring new technologies and consolidating its leadership position in providing non-conventional energy solutions.It will also help the Company to commit larger resources to R&D and commercialisation of new technologies in the areas of Coke Oven & Coal Gasification.

Started in 2001, the company has been growing aggressively and currently sitting on the order book position in excess of Rs.600 crores ($ 140 million) with pipeline of business opportunities in excess of Rs.1,500 crores ($ 350 million). Mr.T.Shivaraman, CEO of SEPC said “This investment will help us achieve our target of Rs.1,000 crores plus ($ 230 million) turnover by 2008. Not only does this investment give us the funds, but Bessemer’s brand also adds a significant value when it comes to international technology tie-ups.”

According to Mr.Rob Chandra, General Partner at BVP, "Infrastructure build-out typically spans several decades, and India is in early stages of seeing significant investments to bring its infrastructure upto global standards. As a specialized engineering services company with a clear focus on technology, Shriram EPC is well placed to benefit from this growth. We are pleased to be associated with the Shriram Group and are impressed by Shriram EPC's strong management team and robust order pipeline across various high-potential sectors. We look forward to partnering with Shriram EPC as they continue to aggressively grow their engineering & construction business. "

Bessemer Venture Partners is the oldest venture capital and private equity firm in the United States, with investments throughout the world. With offices in Silicon Valley, Boston, New York, Shanghai, and Mumbai, the firm manages two billion dollars of venture funds, carrying on a tradition of hands-on, active investing that has continued since 1911. Its India presence represents the Firm’s first office outside North America in its 95-year history. Over 100 Bessemer companies have gone public, including American Superconductor, Ciena, Gartner Group, Ingersoll Rand, International Paper, Maxim, Parametric, Perseptive Biosystems, Staples, VeriSign, Veritas and W.R. Grace.

KPIN Capital Consulting Pvt. Ltd., Mumbai, acted as Exclusive Advisors to SEPC for the investment.

25 Comments:

At 5:04 PM, Anonymous Rajan said...

Hi Anand,

U were right when u said u will close this deal pretty fast.

Having worked in the infrastructure financing sector for close to an year I feel that Indian infrastructure sector is on a roll and firmly believe that the current momemtum will be atleast maintained, minor hiccups not withstanding.

We met in Delhi.

Congrats on closing the deal.

Cheers :)

 
At 6:17 PM, Anonymous Razib Ahmed said...

If India wants to sustain its high eonomoic growth it must focus on improving the infrastucure more and

ADB president Haruhiko Kuroda has already stated that If India
can address
the issue of infrastructure seriously then India has the potential to maintain
high growth for two decades.
Congratulations on your success.

 
At 12:25 AM, Anonymous Sunder Iyer said...

Nice to see someone actually addressing Indian Infrastructure woes.Considering the demand, I think Bessemer will have high multiple returns. Now if somebody only invested in Parking lot's :-)

 
At 4:39 PM, Blogger Whitepyjamma said...

Hi Fellow Country Men,

It nice to see that some one some where is investing in this companies and giving them a helping hand to move up the ladder.

But do we have some one who can erdicate the Indian poverty by starting some Small Scale Industry and employing the people from the BPL (Below Poverty Line) cateogary and generating revenues to pay them salaries and lifting them from the BPL cateogary.....
I think None.
Dear Anand, it doesnt require 100 crores to start a Small Scale Industry, what you require is couple of lakhs to start up. The segments to start could be Candels, Agarbathis, Modular Furniture...many other segments.

Regards
Kiran Jain

 
At 10:53 AM, Anonymous Neal said...

Sorry to pick on you... but the fact that you bring up ur Don Bosco + IITM similarities with the CEO makes me lose any respect for you... I also went to a private school in India and top 5 MBA school here in the US... but I tend to keep shut about it (so called privileged background)and instead concentrate on proving myself based on my actions...

 
At 11:27 AM, Anonymous Anonymous said...

What does the EPC stand for in Shriram EPC...

 
At 5:06 AM, Anonymous Anonymous said...

EPC = Engineering, Procurement and Construction..
e.g., Bechtel of USA

 
At 4:07 AM, Anonymous Anonymous said...

Anand,

What is it with you IIT guys???? Do you really have to mention it every opportunity you get (or make an opportunity simply to mention it). You've lived in the US!!! You know what I mean... Education is a means to an end... not an end in itself.. Bush is a Harvard MBA. So what does that prove? Actions speak man... not your background.. Peace out! (no I'm not Neal... just another pissed off lesser mortal trying to make it without the pedigree).

 
At 2:39 PM, Anonymous Anonymous said...

"That's as good an excuse as I have for not blogging, as I've been really busy over the last 6 weeks on this front."

If ever you thought anybody missed it then you are seriously mistaken Mr.Donbosco/IIT

 
At 8:19 PM, Anonymous Anonymous said...

infrastructure is a hot sector in india now. roads, flyovers, water supply you name it and we need it.
But also we must not forget our social responsibility. Poverty,AIDS and so on. I would bet biotech has an equal opportunity with the great brain power india has . what do u say ??

 
At 9:09 AM, Blogger Freudian Slip said...

Congrats on closing the deal!
Matt

 
At 4:42 PM, Anonymous Chandra said...

Pathetic....till the time you stuck to ur analysis as to why u invested in shriram..it was good....but once you talk about your common affiliations, and brag about 1-2 ppl making it big from ur common blah blah...it sucks...big time!

cmon man...from when did harping about edu. quali..and brandishing ur edu backgrounds lead to good decisions in life??

 
At 8:29 AM, Anonymous Anonymous said...

please, please don't stop writing blogs again - we were all so anxious for a while and then turned to despair and depression when we didn't see your updates. You know that our lives will be such a mess without you...but now that you are back, can you ask your other IITian friends to contribute as well - I never tire of hearing their school mentioned in every other paragraph.

-ravi vooten
JEE rank 37, opted to join AIIMS instead (1980)

 
At 10:40 PM, Blogger Santosh said...

I want to know whether Bessemer Venture Partners provide funding for renewable energy sector like "Windmills" in India.

 
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